Equity release and deprivation of assets

Deprivation of assets is where a person intentionally deprives themselves of or decreases their assets to reduce the amount they are charged for their care. It is common for people to give money or assets to family members at any stage in their life. So is equity release classed as deprivation of assets?

If your council believes you have taken out equity release in order to “cheat” the means test – known as “deliberate deprivation of assets” – then it is within its rights to ignore the equity release deal and assess you on the basis that you still own all the equity in your home.

There are legitimate reasons as to why you can gift your assets without them potentially being used as part of the calculation to see if you have to pay for your care fees

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What is classed as deprivation of assets?

Deprivation of assets means that you have intentionally offloaded your assets, in order to reduce the amount you contribute towards the cost of care services provided by the local authority.

When is deprivation of assets classed as deliberate?

Deprivation of assets is classed as deliberate when your primary motive for disposing of assets was to remove eligible capital or income from your financial assessment by the local authority. The local authority must make it clear why it comes to any conclusions, there are a number of things it looks at:

Intention

Your intention to avoid your care charges must be a significant factor, or the only reason, you have transferred an asset elsewhere, in order to be found to have deprived yourself. The local authority must justify their decision if they intend to take a transferred asset into account.

Foreseeability

It can be considered unreasonable to decide that you have disposed of an asset to reduce the level of care charges payable if, at the time of the disposal, you were fit and healthy and could not have foreseen a need for care and support.

Local authority investigations

The local authority may conduct its own investigations into whether deprivation of assets has occurred, rather than relying solely on information you provide. They should take into account:

  • whether avoiding care and support charges was a significant motivation
  • when the asset was disposed of, could you have a reasonable expectation of the need for care and support?
  • did you have a reasonable expectation of needing to contribute to the cost of your eligible care needs?

In several complaint investigations, the Local Government and Social Care Ombudsman has found local authorities at fault for failing to consider whether the significant motivation is avoiding care and support charges when concluding that deliberate deprivation has occurred.

Unpredictable consequences of your actions

The nature of the rules on deliberate deprivation of assets mean it is not possible to predict with certainty whether the local authority will raise the issue during a future financial assessment. An authority will not usually advise you beforehand how it might treat a particular transfer at a later

time. The rules relate to the moment your financial assessment happens.

If you’re unsure about where you stand, don’t hesitate to get in touch through our equity release advice page.

What is not considered deprivation of capital?

If you pay off or reduce a debt that you owe, or buy goods or services, is not classed as deprivation of capital.

What is deprivation of capital?

Things that may be considered deprivation of capital:

  • A lump-sum payment to someone else, for example as a gift
  • Substantial expenditure has been incurred suddenly and is out of character with previous spending
  • The title deeds of a property have been transferred to someone else
  • Assets put into a trust that cannot be revoked
  • Assets converted into another form that are disregarded in the financial assessment, for example personal possessions
  • Assets reduced by living extravagantly, for example gambling
  • Assets used to purchase an investment bond with life insurance.

What is deprivation of income?

It is possible to deliberately deprive yourself of income. For example, if you give away or sell the right to income from an occupational pension. It could be treated as deprivation if you are entitled to Pension Credit but have chosen not to claim it.

The local authority will determine whether deliberate deprivation of income has occurred. They’ll consider:

  • Was it your income?
  • What was the purpose of the disposal of the income?
  • the timing of the disposal – when the income was disposed of, could you have a reasonable expectation of the need for care and support?

As income can be converted into capital, deliberate deprivation can relate to the tariff income calculation in the financial assessment for care costs. The local authorities can consider whether doing this has had the effect of reducing what you are charged.

How long does equity release take?

Is there a time limit on deprivation of assets?

There is no time limit to deprivation of assets, meaning any past disposal of assets could be considered when looking at care costs.

What are the consequences of deliberate deprivation of assets?

If deliberate deprivation of assets is discovered, the local authority may decide to treat you as if you still own the asset. This means treating you as if you have ‘notional’ capital or income, even if you don’t.

If you lose an actual resource and replace it with something of lesser value, you are treated as having the difference in value between the two. Personal possessions acquired for less than their cost are treated as notional capital.

Equity Release Interest Rates, Good and Bad?

Will I still get financial support for care if I’m found to deliberately deprived myself of assets?

If you have deprived yourself of assets and are treated as having notional capital above the upper threshold, the local authority do not have a duty to arrange your care, unless you lack mental capacity and have no one to assist you.

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Challenging local authority decisions on deprivation

If you disagree with a decision by the local authority about deprivation of assets, you can challenge this using the formal complaints procedure:

  1. Ask the local authority for details of its procedure.
  2. Remind the local authority that they must show that you were significantly motivated by avoiding care costs, at a time when you could have reasonably expected having needs for care and support and needing to contribute towards the cost of meeting your needs.
  3. The local authority must base its decision on the facts of your individual case and consider all relevant circumstances. It should allow you to submit relevant evidence in support of your account.
  4. They must avoid setting blanket policies stating that particular forms of spending, for example purchasing a funeral plan or a high cost care package, will automatically be treated as deliberate deprivation.
  5. If you believe that the disposal of assets took place at a time when you could not have reasonably expected having needs for care and support, explain the reasons for this. Refer to any evidence you have, for example bank statements showing you spent money before you had needs for care and support.
    1. You can point out that deliberate deprivation cannot be found if the disposal took place when you were fit and healthy and could not have foreseen needing care and support.
  6. If you dispose of assets at a time when you have care and support needs, for example when receiving care services, the local authority should not automatically assume that deliberate deprivation has occurred.
  7. They must be able to show that you were also significantly motivated by avoiding care costs. Be clear and specific as you can about your motives, explaining any reasons why the disposal of assets in question was unconnected with avoiding care costs.

If you are not satisfied with the outcome of your complaint, you can take it to the Local Government and Social Care Ombudsman.

If I give a gift will it be considered deprivation of assets?

There are many legitimate reasons to give someone a gift by transferring ownership of your property. The impact may be that the value of these assets are not counted when determining whether you must pay your care fees.

Popular reasons for gifting assets, include:

  • Preventing family conflict before it starts – Early asset division can prevent problems later on, and you can do it while you’re in complete control.
  • You want to see the recipient of the gift enjoy it as soon as possible. – You may want to lend a hand to your children with the purchase of a home or the start-up of a business, so you provide them with the necessary funds.

How do I avoid deprivation of assets?

There are many different ways of planning effectively to avoid what’s classed as deliberate deprivation.

The best thing to do is speak to an independent financial advisor about your unique circumstances so that you can make sure your future is taken care of.

For any help and guidance, please don’t hesitate to get in touch by clicking the button below

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